Donald Trump on Tuesday signed a bill to sanction Chinese officials over Beijing's crackdown of Hong Kong and announced an end to trade preferences for the semi-autonomous territory.
"Hong Kong will now be treated the same as mainland China - no special privileges, no special economic treatment and no export of sensitive technologies," the US president said in an address from the White House Rose Garden.
The move is in response to a draconian security law brought in by China which makes it easier to punish protesters and reduces Hong Kong's autonomy.
"Their freedom has been taken away, their rights have been taken away. And with it goes Hong Kong, in my opinion, because it will no longer be able to compete with free markets," Mr Trump said.
The president went on to predict that "a lot of people will be leaving Hong Kong" as a result of him signing the Hong Kong Autonomy Act.
China said it would retaliate, claiming the act "maliciously slanders" its new security law. "China will make necessary responses to protect its legitimate interests, and impose sanctions on relevant US personnel and entities," the foreign ministry said.
The legislation was passed by Congress after Beijing pushed through its new national security law in Hong Kong and targets banks doing business with Chinese officials who are seen as impeding the city's autonomy.
There had initially been some uncertainty over whether Mr Trump would sign the legislation because it reduces the president's ability to waive sanctions.
The decision to sign the legislation into law is a further escalation of tensions between the Trump administration and China, which he has increasingly cast as an enemy ahead of November’s presidential election.
Washington has already announced it is to treat Beijing’s pursuit of resources in the disputed South China Sea as illegal, a move expected to boost support within south-east Asia and trigger anger in China.
“Beijing’s claims to offshore resources across most of the South China Sea are completely unlawful, as is its campaign of bullying to control them,” said Mike Pompeo, the US secretary of state. “The world will not allow Beijing to treat the South China Sea as its maritime empire.”
The US has long advocated freedom of navigation in the South China Sea, a vital waterway for global commerce under which valuable oil and gas deposits are to be found.
Yet Mr Pompeo’s statement goes further by explicitly siding with China’s neighbours, including the Philippines and Vietnam, after years taking no position on rival claims.
Beijing lays claim to most of the South China Sea and has built military bases on islands while dragging out a diplomatic process to resolve the disputes. On Tuesday, China responded forcefully to Mr Pompeo’s comments, saying the accusation of unlawfulness was “completely unjustified”.
The top US diplomat for East Asia warned on Tuesday that Washington could respond with sanctions against Chinese officials and enterprises involved in coercion in the South China Sea. David Stilwell, the assistant secretary of state for East Asia, said: “Nothing is off the table ... there is room for that. This is a language the Chinese understand - demonstrative and tangible action.”
It came after Malaysia claimed that Chinese coastguard and navy ships had intruded into its waters in the disputed South China Sea 89 times between 2016 to 2019, and often remained in the area even after being turned away by the navy.
Meanwhile, China on Tuesday declared a primary election for pro-democracy parties in Hong Kong “illegal”, saying it violated the new national security law.
More than 600,000 residents voted over the weekend in an unofficial ballot to determine which candidates to put forward for the September election to the Legislative Council, the Beijing-dominated body that oversees the city.
On Wednesday, a key organiser of primary elections for Hong Kong's democracy camp said he was stepping down due to Beijing's accusation that the vote was illegal and could amount to subversion. Former lawmaker Au Nok-hin helped organise the weekend poll.
Carrie Lam, the city’s leader, said on Monday that the voting was subversive in that it was an attempt to undermine the parliament and deliberately block government proposals.
“If this so-called primary election’s purpose is to achieve the ultimate goal of delivering what they called ‘35-plus’ [the majority of MPs], with the objective of objecting or resisting every policy initiative of the HKSAR government, it may fall into the category of subverting the state power – one of the four types of offences under the national security law,” Ms Lam said.
“I am not saying it has breached (the law), but I have to put forward a warning that if that’s going to be proven to be the case, then it’s certainly a case to be answered.”
Beijing’s liaison office later said the vote was an attempt to overthrow the government and accusing one of the organisers, Benny Tai, who co-founded the National Occupy Movement, of colluding with foreign powers.
Mr Tai rejected the allegations on Facebook, saying the polls were free of any foreign influence and merely reflected the will of the people.
The New York Times on Wednesday said it was moving its digital news hub from Hong Kong to South Korea as a result of the national security law.
"China's sweeping new national security law in Hong Kong has created a lot of uncertainty about what the new rules will mean to our operation and our journalism," executives wrote to staff.
"We feel it is prudent to make contingency plans and begin to diversify our editing staff around the region."